CYFARFOD BWRDD IECHYD PRIFYSGOL UNIVERSITY HEALTH BOARD MEETING

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1 CYFARFOD BWRDD IECHYD PRIFYSGOL UNIVERSITY HEALTH BOARD MEETING DYDDIAD Y CYFARFOD: DATE OF MEETING: TEITL YR ADRODDIAD: TITLE OF REPORT: ARWEINYDD CYFARWYDDWR: EXECUTIVE LEAD: SWYDDOG ADRODD: REPORTING OFFICER: 27 th January 217 Update to Financial Handling Plan 9 Stephen Forster, Interim Director of Finance Stephen Forster, Interim Director of Finance Pwrpas yr Adroddiad (dilewch fel yn addas) Purpose of the Report (delete as appropriate) Ar Gyfer Penderfyniad Ar Gyfer Trafodaeth For Decision For Discussion Er Gwybodaeth For Information ADRODDIAD SCAA SBAR REPORT Sefyllfa / Situation This report updates the Board on the analysis undertaken on performance up to 9 216/17 versus the Financial Handling Plan. It further reminds Board Members of the rationale behind the change in the forecast deficit at year end from 43.51m to m agreed by Executive Team prior to the submission of the 8 Monitoring Return to Welsh Government, approved by the Board at its In Committee meeting held on 15 th December 216. Cefndir / Background At the Extraordinary meeting of the Audit & Risk Assurance Committee on 7 th September 216, a review of the over spending areas within the University Health Board (UHB) as at 4 (July 216 performance) was discussed. The majority of overspend was occurring in premium cost variable pay with significantly smaller overspends in non-pay and Continuing Health Care (CHC). Following the closure of the 8 (November 216) position, the Executive Team met to discuss the position which was a deficit year to date of 4.32m or 92% of the prior full year forecast. The Executives recognised that, despite the significant work ongoing in the area of Variable Pay savings, the cost pressures arising have negated much of the potential to deliver the bottom line benefit of savings. This conclusion, by necessity, has been reflected in the revised deficit of m summarised later in this paper, approved by the Board at its In Committee meeting held on 15 th December 216. Asesiad / Assessment 1. The Plan The Financial Handling Plan agreed in September 216 set out the scale of the challenge facing the UHB. In brief this proposed a movement from the 38.3m IMTP deficit as follows: Page 1 of 1

2 Initial Forecast deficit for 16/17 38,3 Central Cost pressures notified 6 th April 216 2,3 Unplanned national issues occurring after IMTP 3,2 finance plan agreed Sub Total 43,8 Additional organisational action agreed in-year ( 749) Proposed revised forecast outturn 43,51 A number of key risks in the Most Likely forecast of 43.51m were related to containing the expenditure run rate, delivery within the remaining 6 months of m of savings mainly from Variable Pay ( 11.8m) and CHC ( 1.947m), cost pressure from Tier 1/RTT and the Winter Plan 2. 8 financial and savings performance versus the original Handling Plan Taking each of the above key risks in turn the position after 8 was: Run Rate - Since the 4 baseline of the plan, after adjusting for known issues recognised as costs or gains, the total year to date variation from the anticipated run rate by 8 was 2.4m in respect of Pay ( 1.2m Variable Pay), Clinical Supplies and Services (.6m), WHSSC (.417m) and Primary Care Prescribing (.377m) Savings These have not delivered in the manner required in particular the Variable Pay target has delivered little to the bottom line despite gross savings in Nursing Variable Pay of 3.7m being delivered. CHC has also delivered some limited gross savings but the average run rate has, if anything, increased with Elderly Mentally Ill (EMI) provision being a major cost pressure in CHC. Tier 1/RTT and the Winter Plan - Cost pressures for both have been funded by Welsh Government, albeit tied to delivery of performance targets. 3. Revised Forecast plan Given the issues discussed above the deficit forecast was discussed at a meeting of Executives on 12 th December 216 and confirmed by the Board in its In Committee meeting on 15 th December 216. At this meeting it was agreed after considerable discussion of the opportunities and risks, to reluctantly increase the deficit to m. In summary this is as follows: Page 2 of 1

3 Surplus/ Surplus/ (deficit) (deficit) m m Forecast Deficit - September handing Plan (43.51) Cost pressures Savings Targets - Assumed not delivered bottom line (14.747) 5-8 impact on run rate Variable Pay (1.2) EASC (.616) WHSSC (.417) Primary Care prescribing (.377) (2.61) Other risks Risk inherent in original plan re WG funding of Tier 1/RTT (1.97) Total Risk month 8 (62.378) Planned solutions Tier 1/RTT & Winter plans/ funding assumptions Tier 1/RTT excess cost over reserve (3.3) Winter Plan (1.1) Funding Assumed WG for costs already incurred and future plans Budgetary Gains Dental slippage - Contractor.5 Technical Gains CHC - WAO decision regarding Phase 3+ provision 2. Final Reserves slippage Release of Overseas recruitment cost reserve to savings.93 Other.44 Savings- Revised targets month 9 to 12 Deliver 1.5m variable pay savings 1.5 Deliver 5% of CHC savings including ICF slippage 1. Deliver non pay savings to target.3 Revised Deficit (51.815) The above plan is not without remaining challenges. Of those that are currently known the key ones are: Run Rate There is no remaining flexibility available to address run rate adverse variation. Even within the plan the following are assumed o Pay were we to extrapolate the impact of the 6 variable pay spike into the run rate this would indicate an additional 1.5m of costs to be covered before the requirement to make 1.5m of Variable Pay savings. This has not been undertaken on the basis that all pay should be contained. All opportunities to reduce total pay expenditure, consistent with the clinical safety of the services and the need to reduce variable pay, should be secured. o Non Pay Non pay likewise has had particular challenging months. A key requirement is that Clinical Supplies and Services non pay will need to be contained within budget from now on (before savings assumption of a further.3m). Consequently Planned and Unscheduled Care non pay in particular will be scrutinised and challenged Page 3 of 1

4 to ensure it is minimised and kept within funding assumptions for Tier 1/RTT. Tier1/ RTT & Winter Plan Any reduction in assumed WG income will need to be managed. CHC The WAO agreement with representatives of NHS Wales regarding the recognition of Phase 3 claims as contingent liabilities rather than expenditure provisions is based on the analysis of Phase 3 claims managed on behalf of Wales by Powys Health Board. Phase 4 and 5 claims are managed by the Health Boards locally but are similar in many ways to the Phase 3 claims. It is anticipated that they will be treated as contingent liabilities also as was the case in 215/16. Reserve Slippage All slippage expectations in reserves and other areas are agreed and delivered. Savings All savings must have a demonstrable bottom line effect i.e. be net of costs financial and savings performance versus the revised (December 216) Handling Plan 9 was the first month of implementation of the revised handling plan. Since it was agreed the following are RAG rated updates. Issue Progress to date RAG rate Tier 1/ RTT & Winter Plan The Handling Plan assumed WG funding of 7m. In late December 216, 6.31m was confirmed based on normal allocation shares of the monies held by WG. The shortfall of.69m versus the plan has placed further emphasis on GREEN the other elements to deliver. In the light of this, only 2m has been assumed to the plan to date with a contribution of.5m (1/4) being made in 9. There is also the risk of WG removal of some funding if performance does not meet stated requirements. Technical Gains All CHC provisions and Reserves gains have been brought in pro rata to the remaining 4 months starting in 9. GREEN Variable Pay Savings Non Pay Savings CHC Savings Budgetary Gains These were required to be 1.5m and are a key plank in the plan. 9 showed no improvement in Variable Pay. Actions have now been agreed but given the pressures at the beginning of January 217 it is a serious risk to the plan Although relatively modest assumptions were made (.3m) there has been no improvement in 9 1m was assumed and to date a schedule of over.8m has been identified. As might be envisaged, given the urgency these are generally short term slippage contributions and whilst they should go most of the way to meeting the target, they do not address the fundamental cost pressures in CHC. The current slippage on one dental contractor is being monitored and will not be confirmed until year end. RED RED AMBER AMBER The contribution these have made to 9, over 8, was 1.351m bringing the variance run rate down to 3.81m in 9 from 5.267m in the previous month. This compares to 3.661m forecast in the 8 monitoring returns for 9. However, savings non delivery in 9 was abated in part by bringing the contribution of RTT/ Winter Pressures funding in four equal instalments a month earlier than previously envisaged, placing further importance on the delivery of Page 4 of 1

5 savings in the coming three months. In order to illustrate the requirement from 9 onwards, Annex 1 lists the required run rate, updated for 9 actual performance, by SCNE category, and Annex 2 displays key areas graphically. Please note that the graphs are monthly figures required to achieve the total and the scale on the left is for Plan (budget less savings required) & Actual (expenditure), the scale on the right is variance. s 1 to 12 are as required and are, in a number of cases, required monthly surpluses. Argymhelliad / Recommendation The Board is requested to note and discuss the update to the Financial Handling Plan 9 in light of the revision to the forecast deficit. In particular, attention is drawn to the key assumptions, risks and actions detailed in the narrative above and the appendices. The key risk of Variable Pay savings delivery is highlighted. Amcanion: (rhaid cwblhau) Objectives: (must be completed) Safon(au) Gofal ac Iechyd: Health and Care Standard(s): Amcanion Strategol y BIP: UHB Strategic Objectives: Gwybodaeth Ychwanegol: Further Information: Ar sail tystiolaeth: Evidence Base: Rhestr Termau: Glossary of Terms: Partïon / Pwyllgorau â ymgynhorwyd ymlaen llaw y Cyfarfod Bwrdd Iechyd Prifysgol: Parties / Committees consulted prior to University Health Board Meeting: Effaith: (rhaid cwblhau) Impact: (must be completed) Ariannol / Gwerth am Arian: Financial / VFM: Risg / Cyfreithiol: Risk / Legal: Ansawdd / Gofal Claf: Quality / Patient Care: Gweithlu: Workforce: Cydraddoldeb: Equality: Governance, Leadership & Accountability Our key service and financial challenges require efficiency and productivity savings as well as service redesign over a number of years, whilst ensuring the highest level of financial governance in the current financial year. Year to date 9 financial position and Quality, Innovation, Productivity and Prudency (QIPP) savings performance 216/17. Contained within the text Executive Team Day 9 review meetings s 8 (12 th December 216) and 9 (12 th January 217). In Committee Board meeting 15 th December 216. Value for Money considerations are inherent in this report. Risks, both service and financial to the achievement of ongoing financial stability are detailed in the report These are assessed as part of our savings planning. Discusses financial implications of variable pay elements Not applicable Page 5 of 1

6 Annex 1 Statement of Comprehensive Net Expenditure based plan TOTAL Income Total-Plan 65,845 67,113 57,1 66,388 65,747 73,688 65,825 65,618 67,576 66,552 66,33 77,41 85,67 Income Total-Actual 65,935 67,218 56,967 66,551 65,749 73,636 65,94 65,598 67,551 66,571 66,322 77,425 85,465 Income Total-Variance Primary Care Contractor (excluding drugs, including non resource limited expendi 8,99 9,167 9,343 8,581 9,39 9,14 9,71 9,19 9,171 9,39 9,55 9,372 18,951 Primary Care Contractor (excluding drugs, including non resource limited expendi 9,57 9,65 9,34 8,589 8,974 8,652 9,59 8,869 9,14 9,4 9,4 9,63 17,726 Primary Care Contractor (excluding drugs, including non resource limited expendi ,225 Primary Care - Drugs & Appliances-Plan 5,92 5,454 5,678 5,678 5,678 5,678 5,678 5,678 6,271 5,744 5,744 5,744 68,927 Primary Care - Drugs & Appliances-Actual 5,92 5,377 5,64 5,64 5,697 5,81 5,679 5,714 6,357 5,829 5,829 5,829 69,34 Primary Care - Drugs & Appliances-Variance Provided Services - Pay-Plan 3,62 29,496 3,315 3,13 3,232 3,58 3,634 3,37 3,673 3,369 3,376 3, ,613 Provided Services - Pay-Actual 31,146 31,27 31,177 31,6 31,263 32,295 31,493 31,368 31,695 3,696 3,696 3, ,8 Provided Services - Pay-Variance 1,84 1, ,31 1, ,61 1, ,187 Provider Services - Non Pay (excluding drugs & depreciation)-plan 5,31 5,271 3,39 5,217 5,519 5,35 5,384 5,262 5,58 5,15 4,78 5,182 6,459 Provider Services - Non Pay (excluding drugs & depreciation)-actual 5,686 5,65 4,14 5,438 5,72 5,457 5,846 5,99 5,613 5,22 5,22 5,22 65,154 Provider Services - Non Pay (excluding drugs & depreciation)-variance ,695 Secondary Care - Drugs-Plan 2,528 3,13 2,934 2,891 2,76 2,97 2,95 2,972 2,897 2,89 2,89 2,887 34,591 Secondary Care - Drugs-Actual 2,744 2,932 3,449 2,999 2,67 2,977 2,98 3,18 2,832 2,958 2,958 2,958 35,492 Secondary Care - Drugs-Variance Healthcare Services Provided by Other NHS Bodies-Plan 1,214 1,184 1,241 1,456 1,299 1,62 9,888 1,271 1,273 1,271 1,271 1, ,259 Healthcare Services Provided by Other NHS Bodies-Actual 1,291 1,128 1,189 1,354 1,284 1,44 1,431 1,593 1,212 1,325 1,325 1, ,897 Healthcare Services Provided by Other NHS Bodies-Variance Non Healthcare Services Provided by Other NHS Bodies-Plan Non Healthcare Services Provided by Other NHS Bodies-Actual Non Healthcare Services Provided by Other NHS Bodies-Variance Continuing Care and Funded Nursing Care-Plan 4,6 3,718 3,853 3,854 4,92 4,193 3,912 3,893 3,893 3,83 3,83 3,887 47,15 Continuing Care and Funded Nursing Care-Actual 4,7 4,2 3,886 4,244 4,33 4,46 4,176 3,44 3,947 3,611 3,611 3,61 47,485 Continuing Care and Funded Nursing Care-Variance Other Private & Voluntary Sector-Plan ,58 Other Private & Voluntary Sector-Actual ,231 Other Private & Voluntary Sector-Variance Joint Financing and Other -Plan ,295 Joint Financing and Other -Actual ,253 Joint Financing and Other -Variance ,42 DEL/AME Depreciation\Accelerated Depreciation\Impairments-Plan 1,283 1,313-5,672 3,157 1,283 8,615 1,53 1,218 1,216 1,26 1,26 1,589 17,467 DEL/AME Depreciation\Accelerated Depreciation\Impairments-Actual 1,283 1,313-5,672 3,157 1,283 8,615 1,53 1,218 1,216 1,26 1,26 1,589 17,467 DEL/AME Depreciation\Accelerated Depreciation\Impairments-Variance Non Allocated Contingency Deficit IMTP-Plan -3,192-3,19-3,19-3,19-3,19-3,19-3,19-3,192-3,192-3,192-3,192-3,2-38,3 Deficit IMTP-Actual Deficit IMTP-Variance 3,192 3,19 3,19 3,19 3,19 3,19 3,19 3,192 3,192 3,192 3,192 3,2 38,3 Reserve Contributions to bottom line-plan 1,961 2, , ,499 1,499 1,499 1,497 13,958 Reserve Contributions to bottom line-actual Reserve Contributions to bottom line-variance -1,961-2, , ,499-1,499-1,499-1,497-13,958 Committed Reserves-Plan 13,889 13,889 Committed Reserves-Actual 13,889 13,889 Committed Reserves-Variance Savings Targets (not extinguished vs Expenditure lines)-plan -1, ,132-1,16-1,273-1,278-1,32-1,396-1,375-1,411-6,37-19,621 Savings Targets (not extinguished vs Expenditure lines)-actual Savings Targets (not extinguished vs Expenditure lines)-variance 1, ,132 1,16 1,273 1,278 1,32 1,396 1,375 1,411 6,37 19,621 Future Central Savings Delivery Requirements-Actual Rates Rebate (from Balance Sheet)-Plan Rates Rebate (from Balance Sheet)-Actual -4, -4, Rates Rebate (from Balance Sheet)-Variance -4, -4, Dental (from reserves)-plan Dental (further slippage)-actual -5-5 Dental -Variance -1,396-1,396 Recovery of incurred costs RTT/Winter funding-plan , Recovery of Incurred Costs RTT/Winter funding-actual Recovery of Incurred costs RTT/Winter funding-variance , Cost - Total Plan 65,845 67,113 57,2 66,388 65,747 73,688 65,825 65,618 67,576 66,552 66,33 77,41 85,68 Cost - Total-Actual 7,627 7,543 62,726 71,719 7,73 79,197 71,221 7,865 71,361 69,499 69,499 79, ,28 Cost - Total-Variance 4,782 3,43 5,724 5,331 4,983 5,59 5,396 5,247 3,785 2,947 3,196 1,883 52,212 Net surplus/ (deficit) - Plan -1 - Net surplus/ (deficit)-actual -4,692-3,325-5,759-5,168-4,981-5,561-5,281-5,267-3,81-2,928-3,177-1,868-51,815 Net surplus/ (deficit)-variance -4,692-3,325-5,758-5,168-4,981-5,561-5,281-5,267-3,81-2,928-3,177-1,868-51,815 Page 6 of 1

7 Charts for SCNE Categories ly Surplus/Deficit and required run rate to achieve m Annex 2 12, Primary Care (excl.drugs) trend 216/17 to date & required 1 1, ' Plan and Actual 9, 8, 7, ' Variance Primary Care Contractor (excluding drugs, including non resource limited expenditure)-plan Primary Care Contractor (excluding drugs, including non resource limited expenditure)-actual Primary Care Contractor (excluding drugs, including non resource limited expenditure)-variance -6 6, -8 5, , Primary Care Drugs trend 216/17 to date & required 6,5 6, ' Plan and Actual 5,5 5, 4,5 2-2 ' Variance Primary Care - Drugs & Appliances-Plan Primary Care - Drugs & Appliances-Actual Primary Care - Drugs & Appliances-Variance 4, ,5-8 3, Note 9 included inclusion of resource neutral WP1 HP funding for the first time. Page 7 of 1

8 33, Pay Trend 216/17 to date and required 2, 32,5 32, 31,5 1,5 ' Plan and Actual 3 3,5 3, 5-5 ' Variance Provided Services - Pay-Plan Provided Services - Pay-Actual Provided Services - Pay-Variance 29,5 29, - 28,5-1,5 28, , 7, Provider Services Non Pay (excluding Drugs & Depn) 216/17 to date and required 2, 6, 1,5 5, ' Plan and Actual 4, 3, 5-5 ' Variance Provider Services - Non Pay (excluding drugs & depreciation)-plan Provider Services - Non Pay (excluding drugs & depreciation)-actual Provider Services - Non Pay (excluding drugs & depreciation)-variance 2, - -1, , Page 8 of 1

9 4, Secondary Care Drugs trend 216/17 to date and required 3, 3,5 2,5 3, 2, ' Plan and Actual 2,5 2, 1,5 1,5 5 ' Variance Secondary Care - Drugs-Plan Secondary Care - Drugs-Actual Secondary Care - Drugs-Variance , LTA/SLA (HCSPoNHS) trend 216/17 to date and required 2, 11,5 1,5 1 ' Plan and Actual 1,5 1, 9,5 5-5 ' Variance Healthcare Services Provided by Other NHS Bodies-Plan Healthcare Services Provided by Other NHS Bodies-Actual Healthcare Services Provided by Other NHS Bodies-Variance 9, - 8,5-1,5 8, , Page 9 of 1

10 5, CHC/FNC trend 216/17 to date and required 4,5 8 4, 6 3,5 4 ' Plan and Actual 3, 2,5 2, 2-2 ' Variance Continuing Care and Funded Nursing Care-Plan Continuing Care and Funded Nursing Care-Actual Continuing Care and Funded Nursing Care-Variance 1, Page 1 of 1